Black-owned businesses grew exponentially last year, more proportionately to the country’s population than at any other point in the past 25 years, according to a study from the Kauffman Foundation.
Researchers found 380 of every 100,000 Black Americans started a new business during the COVID-19 pandemic of 2020. It was nearly a 60% increase from the previous two years. The rate of Black entrepreneurism outpaced that of white and Asian-owned businesses, the study said.
The Black business jump reflects the detriment and adverse consequences of a global pandemic on underserved communities. Black businesses took a severe hit amid shutdowns, a 41% plunge versus a 20% drop for other businesses, according to research from the University of California-Santa Cruz. Black people died from COVID-19 at disproportionately higher rates. Black employees suffered significant job losses and pay cuts.
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Many Black business startups face an uphill challenge. Overall, there is a low success rate. When businesses begin amid furloughs, layoffs, and firings -- called “necessity” startups -- they have a higher failure rate than others.
The report, co-authored by UC-Santa Cruz economics professor Robert Farlier, noted that the uptick in numbers also likely includes businesses forced to shut down that are now reopening.
Racial injustice protests last year prompted lenders to promise more equitable investment in Black-owned businesses. Bank of America promised to spend $1 billion. JPMorgan Chase said it would provide affordable loans to at least 15,000 Black and Latino small businesses. Several corporations also made investment commitments aimed at racial equity, nearly $50 billion worth. Only about $250 million has been distributed so far, according to Creative Investment Research.
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“You do see a groundswell of activity. It’s a lot of talk and commitments,” Michael Roth, who helps small businesses get funding, told the LA Times. Roth spearheaded the Biden White House’s Small Business Administration transition efforts. “Large corporations are not yet making whole, making true on their commitments.”
Soon-to-be-updated Census data shows Black people account for 13% of the U.S. population, but Black businesses only account for 2% of all U.S. companies.
Roth believes the government and banks need to make widespread, systemic changes to how they dole out resources to Black entrepreneurs to see that improve. Many are hopeful the Biden administration will make financial reform and racial equity and the top of its agenda.